Modeling foreign direct investment returns and economic growth in Nigeria

Abstract

Foreign Direct Investment (FDI) is a strategy used by the majority of developing nations, including Nigeria, to increase their foreign exchange reserves through investments, business ventures, and international aid. The main goal of this study is to model foreign investment returns and economic growth in Nigeria. To my knowledge, no prior research on the relationship between FDI and economic growth has used a simulation with differential equations, therefore our study adds to the body of knowledge by using both a robust regression model and the simulation approach. The robust regression model was used, and the outcome demonstrates that foreign direct investment positively affects Nigeria's economic expansion. According to the simulation results, an additional $1 billion increase in foreign direct investment will cause Nigeria's GDP to grow by around $3 billion. Robust regression and simulation models combined for improved precision show that FDI has a beneficial impact on economic growth. Consequently, the Nigerian government must step up by creating a more favourable environment and ensuring the safety of people and property to draw in foreign investors. It must also increase the country's foreign reserves by investing enough money from the removal of subsidies to give average Nigerians access to financial inclusion, infrastructure growth to boost productivity, and more employment opportunities to make it easier to payment of foreign debt.